This post was originally published at neweconomyweek.org.
We currently face two equally urgent and significant crises: rising inequality and climate change. Rising inequality is not only morally unacceptable; it hinders economic growth. Climate change is occurring at a faster rate than other time in history and is already impacting every part of the country with low-income communities and communities of color getting hit first and most hard.
Fighting these two battles will require a fundamental economic shift that will require rethinking how the economy is built and where it is grown. Building strong local economies combats inequality by creating and maintaining wealth in communities and is an underused tool in the fight against climate change.
Local economies can be built by creating demand through leveraging local government and anchor institutions’ purchasing power. Instead of outsourcing services and goods to companies that are out of state or even out of the region, these institutions can look locally to meet their needs. Local businesses then spring up to meet this demand for food, services, products, etc. and wealth is created and maintained locally leading to more equitable, sustainable growth. Developing local economies is particularly important for low-income communities and communities of color who suffer from under-investment and a lack of resources.
Currently, many government contracts must be awarded to the “lowest responsible” bid. However, there is room to change what requirements are needed to be “responsible,” and there is room to include additional requirements under “collateral requirements,” which could include setting a standard for employee’s wages and benefits, minimizing carbon emissions, and using sustainable methods and products. With these changes, local procurement becomes competitive, even if the cost may be slightly higher than other bids.
Cities are already leading the way in building strong local economies. In Cleveland, a group of anchor institutions came together to build community wealth as a means of strengthening the city’s economy. The Cleveland Foundation, the Cleveland Clinic, University Hospitals, Case Western University, and the municipal government launched the Evergreen Cooperative Initiative, leveraging a portion of the multi-billion dollar annual business expenditures of the anchor institution to build local businesses to serve the institutions’ needs. The Evergreen strategy looks to build new businesses owned by their employees that are also environmentally sustainable. This strategy keeps resources and jobs local, which helps reverse the city’s economic decline and provides opportunities for its residents.
Likewise, in California, the Los Angeles Unified School District, the nation’s second largest school district, uses its purchasing power to encourage local purchasing, support for small businesses and farmers, and high-quality job creation. The school district doubled the percentage of its food budget that it spends locally, resulting in roughly $60 million redirected to local farmers, processors, warehouses, distributors, and workers. The Good Food Purchasing Pledge is the first procurement policy to tie better nutrition and local sourcing to local economic development, worker’s rights, fair wages, and workplace safety.
Changing how demand is created and where supply is provided keeps opportunity localized, which allows for low-income communities and communities of color to participate in green entrepreneurship, job creation, and wealth building. As seen in Cleveland and Los Angeles, equitable growth through localizing procurement and economic development is good for the economy, communities, and the climate.